lecture 1 - Capitalism and the market economy Flashcards
what is economics>
the study of how people interact with each other, and natural environment, in producing livelihoods
what is capitalism?
an economic system in which is defined by markets, firms and private property
what has the rise in living standards been accompanied by?
change sin population and the way people live
change sin equality between countries
what is the hockey stick model?
a graph showing the rise in GDP over 1000 years between different countries
what are the countries in the hockey stick model?
china, india, britain, italy and japan
1000 years how can the hockey stick be describes?
economically flat
period of stagnation
when did britains GDP start to rise?
around the late 1700s early 1800s
when did japan/italy start to grow?
not till 1900s
how is the growth rate of GDP worked out?
change in GDP / original GDP
how can you work out the change in GDP
work out difference
divide by original number
times by 100
in some countries when was substantial improvements in living standards seen?
not until they gained independence from colonial rule of inference from european nations
(india 1947)
who was the founder of the field of understanding hockey stick growth?
adam smith who wrote the wealth of nations
what are two things that can be gathered from the hockey stick?
- for a very long time living standards did not grow in any way
- when sustained growth it happened at different times at different places
what is GDP per capita?
an estimate of living standards
total income in a country divided by population
what is GDP as a measure?
totally output of an economy
what is disposable income?
a meander of their living standards but ne that omits important aspects of wellbeing
any salaries/rent/proft etc minus any transfer to others and governments
what is a person living standards?
how well off a person is
why is disposable income an insufficient way of measuring wellbeing/living standards?
leavers out
- social and physical enviro (friends and clean air)
- goods endservices we don’t buy (education dn healthcare)
- goods/services provided in the household (meals or childcare)
why is average disposable income not a correct way of measuring average wellbeing?
there may be very big disparities between groups within a country
such as richest and the poorest
doesn’t reflect the real income of some people
why might GDP be a beer way of measuring living standards than disposable income?
it includes goods and services provided by the government
but these can be hard to value
what is a technology?
a process that uses inputs to produce an output
what is an explanation that explains hockey stick growth?
technological progress
the oermannat technological revolution
why did the permeant technological revolution occur?
as more technologies were created the time in which it took in production fell by each generation
by reducing the amount of time it takes to produce thing what has happened?
allowed increase in living standards
what is meant by a connected world?
everyone in contact with eahcother as a result of the technological revolution
what can be used to compare to evidence of the permeant tech rev?
the speed in which information travels
what is another explanation of the hockey stick growth?
the growth in poepelualtion
what does increased productivity of labour in agriculture mean ?
fewer farmers are needed in order to produce the same output
as more people left farming what happened?
they pursued other careers meaning the growth in cities
what are some of the consequence sthat have arisen from the hockey stick growth?
- global impacts like climate change
- local impacts such as pollution, deforestation and congestion
increased production has increased the amount of fossil fuel burins and other materials that are needed in technologies
what is the economy part of?
society which is part of the biosphere (collection of all forms of life)
what is an economic system?
way of organising the production and distribution of goods and services in an entire economy
what is an important form of private property, excluding an insitution?
capital goods e.g materials, patent and equipment
what is a market?
a way of connecting people who mutually benefit by the exchange of goods and services in which are reciprocated
voluntary exchanges of buying and selling
what are essential parts to how a firm works?
firm and market in that inputs and outputs ar epirvate property
firms use market to sell outputs
why did adopting capitalism transform many economies?
- private incentives for cost reducing innovation
- firms led by those with proven ability to produce goods at a low cost
- public policy supporting these condition
what are the two sets of conditions that make a capitalist economic system dynamic?
economic conditions and political conditions
what eceomic conditions mean that capitalism is not dynamic?
- private property is insecure
- monopolised markets / no competition
- leadership in forms comes from inheritance (no merits)
lack innovation / bankruptcy of firms /
why are political condition s important to the dynamism of capitalism?
it can set policies regarding whether private property is secure etc
why might there be divergence among latecomers of capitalism?
for all the reasons for the economic conditions needed
how can you measure inequality between countries?
using the mini coefficient
what is thegini coefficient?
indicate show much disparity there is in income and other measure across income
0= no inequality
higher the higher to 1 the higher th e inequality
what do some countries with high income GDP have?
high inequality
as a lot of the rich people won most of the money
what is economics about?
- how we acquire things/food/clothing/shelter
- how we interact with each other
- intercat with natural environment
- how these things change over time
